Degrowth, and the widening gap between natural- and social science economics

Ecological economist Parrique wrote an excellent book-review on “The Future is Degrowth“, an impressive and exhaustive overview by Matthias Schmelzer, Andrea Vetter and Aaron Vansintjan, of current literature and paradigmatic angles on post-capitalist economics.

The ‘degrowth’ movement is, in essence, a critique of the financial prerogative of capitalism as it currently defines Western societies, and its excesses of the last few decades, resulting in ever-increasing social inequality, environmental damage, depletion of earth-resources, and a financial system gone rogue. It even denies the viability of something like 'green growth’ (a mere continuation of GDP-growth using renewable energy), since this paradigm effectively only results in excercises of greenwashing instead of actually fixing the system.

Degrowth states that, instead of always focusing on ‘economic growth’, we should focus on ‘wellbeing’. Wellbeing of societies AND the environment. ‘Degrowth’ is the latest corollary to the seminal “Limits to Growth” from the 1970s.

To be more precise, I would like to make the following distinction, in providing the incentive to reform the economic discipline:

1. globalization exposes the foundational shortcomings of theoretic models and policies in mainstream economics (the larger scale of ‘the economy’ actually amplifies these flaws into significance) (we can now actually see its shortcomings)
2. globalizing capitalism is having increasingly ravaging side-effects on social cohesion and the environment, now also in the significance-range (incentive to reform out of an existing urgency)

The Degrowth-movement is motivated by the second incentive (reform out of urgency), and as such finds its answers mostly in predistribution initiatives, Raworth’s doughnut economics, sustainability- and wellbeing-principles and of course the very impressive field of ‘the commons’, in which Elinor Ostrom has been absolutely instrumental, when in comes to providing empirical results. In short, most answers (to our current gone-rogue capitalism) are actually changes in ‘political economics’, to establish a reorganization of society. A society where, as Jason Hickle puts it, less is more.

In effect, it wants to make economics into a more holistic social science, one could say, to overgrow the financial growth prerogative. As such, it provides in a much needed and powerful overhaul of the economic discipline, and as such, it is a heterodox movement within mainstream PhD economics.

The most trivial question is overseen

But despite the broad multidisciplinarity of this movement, it remains ‘a social science’, in the sense that it does not provide in empirical methodologies. It can’t, because it does not provide a technical model of ‘growth’ first, that you can experiment on. In all the talk about growth and degrowth, the single most trivial and fundamental question is overseen:

Why does an economy grow in the first place?

Absolutely nobody is asking this question. So, effectively nobody understands, at a fundamentally technical level, why an economic system grows, but everybody thinks they can just have it stop growing, or even reverse it. From a scientific point of view that does not make any sense. Every orthodox and heterodox economist thinks that we, the people, are the driving factor behind ‘growth’: after all, we all want to prosper, make profits, develop innovative new technologies etc. It’s these human incentives behind capital allocation and better technologies that make the economy grow, right? What else could there be? An economy cannot grow without actual human actions, right?

Well, actually something else is going on but it sits outside the scope, the paradigm of economics as a social science.

Trying to fill the gap

From the 1980’s, with the IT-revolution providing unprecedented availability of larger sets of data in finance, some economists started to question the equilibrium-based theoretical models in their discipline. Departing from the traditional ‘linear’ approach, they introduced agent-based modeling, non-linearity and principles from statistical mechanics. This remained a heterodox approach, however, but certainly gained traction as a subdiscipline called ‘econophysics’. Also, many existing assumptions in economic models about probabilistic distributions were empirically invalidated, most notably by the seminal work of Benoit Mandelbrot (“The Misbehavior of Markets”, 2004). There is even a school called ‘evonomics’ that employs evolutionary principles to economics. And there is the long tradition of complexity sciences that originated in the Santa Fe Institute, which has been applied to economic systems as well, most notably by W. Brian Arthur. Another stellar economist in this aspect is Hyman Minksy, who also used a non-equilibrium paradigm, and whose theories can explain sudden shocks in the economic system such as the GFC of 2008, a so-called ‘Minsky moment’. Currently, most notably Steve Keen (Australian economist) is further developing his theory (next to debunking mainstream economics in general).

All these approaches display the same hard science empirical methodology, and use a deeply technical framework. And, again, this is a very incomplete and rough overview, but the takeway is that these schools of economics come from natural sciences, and are not in the traditional social science that economics still is. As such, it is a heterodox movement, and despite its long history, it still is.

Continuation of the turf-wars

But none of it is used in the degrowth-movement, let alone used as theoretical, empirical framework. Within the heterodoxy of degrowth economics, non-equilibrium economics is still too heterodox.

It is much too natural-sciencey for the social science of economics.

And this is a problem because the only way to actually make a remote chance in ‘degrowing’ the economic system is by using a proper (i.e. non-equilibrium) theoretical model to describe the system, associated with a hard empirical framework.

And even then, the first thing to assess within this paradigm is the logic behind ‘growth’; not even the natural-science-economists have asked this question yet, let alone answered it.

The first step, of course, is to rephrase the whole unholy notion of ‘growth’ within a formalized framework, and describe it as class of optimization dynamics, as I have provided in the publication ‘It’s the entropy, stupid!’. But that’s outside the scope of this post.

The point is that the social science of economics apparently wants to remain a social science, and wants to avoid a foundational crisis, even when this crisis is already at its peak and natural-science-economics is providing an actual foundation.

If the degrowth-movement wants to change the system, as a heterodoxy within social-science-economics, it will at least have to properly understand and describe the system first, and cross the bridge to natural-science-economics. If it does not, it will be destined to fail.